CHART OF THE DAY: We're On The Brink Of An Inflation Inflection Point

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The U.S. economy is on the brink of turning from a deflationary environment to an inflationary one, and tomorrow’s PPI number may be an early signal of that fact, according to Deutsche Bank.

Today, we saw import prices rise 1.1%, as expected, including a 13.7% year-over-year rise in oil import prices. The producer price index, released tomorrow at 8:30 AM ET, will likely show similar results, with oil prices leading the pack.

Now the question is, when do these producer prices hit the consumer and will QE3 be the casualty?

From Deutsche Bank (emphasis theirs):

For the past several months we have emphasised the notion that the inflection point for consumer prices, whereby disinflation yields to modest inflation, is likely to be reached in the near term—probably sometime in the current quarter. When this trend becomes more apparent, it will have significant implications for the monetary policy outlook and interest rates. In particular, the decisiveness of the turn in inflation will influence the Fed transition from quantitative easing toward less accommodative policy. If the inflation profile evolves as we project, then the probability for QE3 is low.

PPI and import prices are clearly already turning around.

chart of the day, inflation, deutsche bank, jan 2011

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